The Real Deal New York

Pessimistic Walentas sees no end to housing supply crisis

Is New York City’s inventory crisis hopeless? The short answer is yes, barring a complete upheaval of the city’s housing regulatory scheme, according to Jed Walentas, principal of Brooklyn-based developer Two Trees Management.

Consider his experience with the Domino Sugar factory conversion in Williamsburg, where the planned 3,000 apartments have been locked in the public approvals process for nearly a decade.

If it takes a decade to bring 3,000 units to market, there is little chance that supply can feed an expanding population hungry for housing, a rather pessimistic Walentas explained, speaking today at a breakfast forum hosted by the Center for Real Estate Studies at the New York Law School.

“We’re a city of about 8.5 million people,” he said. “Assume there are 2.5 people per household and about 3 million households. If you expect that number to grow at any reasonable percentage – pick 3 percent a year – the city would have to generate 100,000 new households a year.”

The main stumbling block? A relationship between government and industry that “doesn’t allow for that in any way, shape or form.” And rent control doesn’t help: “It’s basically eliminating those units from the supply side of the equation.”

A long-term solution to the supply crisis would likely involve government concessions such as upzonings and tax breaks. But those initiatives are a long shot in a body like the City Council, which already believes the real estate industry gets a sweetheart deal, he said.

“Government thinks that our industry makes way too much money and they’re right,” he said. “You come to a [Real Estate Board of New York] board meeting with me and I guarantee you everyone in that room is richer than they are smart.”

Plus, concessions to developers would not benefit the rental or affordable housing sectors in the short term, since landlords are not likely to pass on the benefits to tenants, Walentas said. Without short-term payoff, local government is unlikely to champion such strategies, he said.

“We’re a for-profit business and we charge as much rent as we possibly can for our apartments,” he noted.

The Domino Sugar project is slated to bring 2.3 million-square-feet of residences, more than 500,000-square-feet of office space and more than 70,000 square feet of retail, as well as a new public park to the Brooklyn waterfront. The developer, which hopes to break ground on the SHoP Architects-designed waterfront complex by the end of next year, is currently in talks with Brooklyn’s Community Board 1 as part of the process to obtain a zoning variance for the project.

Other speakers at the event, convened to discuss the future of residential real estate, include appraiser Jonathan Miller, attorney Eva Talel and Bonnie Stone Sellers of Christie’s International Real Estate.